RBI widens priority sector lending

PTIMay 20, 2007, 02.51pm IST

MUMBAI: In order to enhance financial assistance to minority communities, Reserve Bank has included them under the ambit of weaker sections to whom domestic commercial banks are mandated to lend 10 per cent of their total loans sanctioned.

Domestic commercial banks have to lend 40 per cent of net loans to priority sectors, while foreign banks have to provide 32 per cent to these sectors.

Within priority sectors, domestic commercial banks have to give 10 per cent of their net lending to weaker sections, but no such specific target is set for foreign banks.

In the recent notification, RBI said in states, where any notified minority community/ies is, in fact, in majority, then only other notified minorities will be included in weaker sections.

These states/union territories are Jammu and Kashmir, Punjab, Sikkim, Mizoram, Nagaland and Lakshadweep, the guidelines added.

RBI, however, has not fixed any specific target for lending to the minorities - muslim, christian, sikh, buddhist and parsi.

The new guidelines came after the Finance Ministry asked the Reserve Bank to amend the priority sector norms to include minority communities under "lending to weaker sections".

The issue was raised at Finance Minister P Chidambaram's meeting with public sector bank chiefs and Reserve Bank of India Deputy Governor Usha Thorat last month.

After the meeting, Chidambaram had said: "The RBI has agreed to change the master circular on priority sector lending to include five minority communities under lending to weaker sections." Early this year, the government had sought opinion of both RBI and Indian Banks' Association (IBA) on a proposal to earmark 6 per cent of loans to borrowers from minority communities. But IBA and RBI had expressed strong reservations against this.

Hence walking a middle path, the Finance Ministry had directed RBI to widen the definition of weaker sections by including minority communities as a segment.

"I am not fixing any target for lending to the minority community. We have identified 103 minority dominated districts and would urge you to open more branches in these districts and increase the flow of credit in these centres," Chidambaram had asked the bankers.